The European Central Bank’s (ECB) rate hike that began with a 50 basis points increase in the cost of money in July and is expected to continue this Thursday at a meeting organized today by the monetary institution’s governing council, is driving domestic Has Bank, but not Banco Santander and BBVA.
Why do some banks benefit from an increase in interest rates and others do not? This is because so-called domestic or medium-sized banks have almost all their business in the eurozone, with a few small exceptions, such as Banco Sabadell with TSB in the United Kingdom, so rate hikes tend to improve its interest margins. Bank Type Institutions.
Unlike domestic banks, The United States is the country that contributes the most to Banco Santander’s profits Nearly tied with Brazil, the United Kingdom in third place, Spain in fourth and Mexico in fifth. In the case of BBVA, Mexico has 45% of the profits due to it, Spain 28%, Turkey 13%, South America 9% and 5% of the remainder.
According to a report by City, the ECB’s recent rate hike on July 21 This means earnings per share (EPS) for BBVA and Santander will improve by less than 5%, Notably, analysts at the US Investment Bank predict that the impact of the rate hike on EPS in BBVA will increase to 0.1995 euros from 0.19 recorded in 2021, while the entity headed by Ana Patricia Botín will rise to around 0.456 euros. From 0.438 euros last year.
banks | Possibility | To | dividing | recommendation | YTD |
Santander Bank | 66,21% | 4.33x | 4,20% | purchase | -17,41% |
BBVA | 41,58% | 5,13x | 6,94% | purchase | -15,02% |
caxabank | 27,55% | 10,12x | 4,90% | purchase | 23,98% |
bankinter | 29,56% | 9,82x | 3,68% | purchase | 9,65% |
sabadell bank | 52,73% | 5,83x | 4,45% | purchase | 12,33% |
unibox | 53.40% | 1,68x | 2,90% | purchase | -2.05% |
According to the estimates of institutions, an increase of 100 basis points (one percentage point) in Interest rates will be allowed to increase by about 3,100 million euros Twelve-month interest margin, which is the time that banks expect their accounts to be liquidated to reflect this increase.
Caixabank will, in fact, be the Spanish bank that will most likely benefit from a potential rate hike by the ECB: its sensitivity is close to 25% for an increase of 100 basis points. This means that taking into account the figures for the end of 2021, its interest margin will increase by 1,500 million after a year.
In the case of Unicaza, the City study published in July reported that the Andalusian unit could improve its EPS by more than 25% due to the ECB rate hike last July. This leaves it, along with Caixabank or Commerzbank, among the most profitable European entities.
In Bankinter’s case, it would take into account the figures at the end of 2021 to enter 128 million more, with a financial margin of more than 10%.
For its part, Banco Sabadell reported in its annual financial report that a year ahead interest margin sensitivity is 5%, which would mean some 171 million more. However, due to provisions and a policy of prudence against risk, an entity like Banco Sabadell takes 24 months, not 12 months, to reflect an increase in rates, so it can increase interest margin to $175 million quarterly two years. Next, according to the same unit.
Positive position of domestic banks of IBEX 35
The market is rewarding Spanish domestic banks this year, despite a sharp drop in the stock markets. Caixabank has been revalued 28.9% so far this year and is positioned as the second fastest value in Ibex 35 after only Repsol, which registered a growth of 30.94% in 2022. For its part, Banco Sabadell has climbed 17% and Bankinter 12.2% so far this year.
On a year-on-year basis, Unicaza shows a 2% decline in BBVA and a massive 17.4% and 15% decline in Banco Santander.
In the last six months, Bankinter has appreciated by 19.6%, Caixabank by 17.2%, Unicaja by 14.9% and Banco Sabadell by 14.2%. BBVA returns 0.45% and Banco Santander 9.5% over the last six months, However, in the previous month’s price, they all see a drop in value, except Banco Sabadell, which has been revalued by 2%. Santander is also the biggest loser in the past month, down 6.7%.
